The US Dollar is the world’s reserve currency, and it accounts for roughly 62% of global foreign exchange reserves, double that of the Euro and Yen. In fact, the US Dollar has been the world’s reserve currency for over 100 years.
Why is it so Important?
The US dollar is the world currency for a number of reasons. It was adopted by several countries in the aftermath of World War II, when the Bretton Woods system pegged national currencies to the dollar and required countries to hold dollars as reserves. The dollar also became popular with oil exporting nations because it was the currency used in oil transactions.
Is the USD Strong or Weak?
A good way to measure the comparitive value of the US dollar to other currencies is to look at the dollar index. The U.S. Dollar Index (USDX) is an measure of the value of the United States dollar relative to a basket of foreign currencies. The Index goes up when the U.S. dollar is stronger compared to other currencies.
The U.S. Dollar Index is at 60-day highs near 104.2, 1.4% above its 3-month average of 102.8, having traded in a quite stable 5.3% range from 100.4 to 105.7
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60-DAY▲HIGH
Track Rate
The US Dollar Index started in 1973 at the value of 100.000. It has since traded as high as 164.72 in February 1985, and as low as 70.69 in March 2008.
Which countries besides the USA use the US Dollar as official currency?
Other nations besides the United States use the U.S. dollar as their official currency. For instance, Ecuador, El Salvador, and East Timor all adopted the currency independently. The former members of the U.S.-administered Trust Territory of the Pacific Islands, which included Palau, the Federated States of Micronesia, and the Marshall Islands, chose not to issue their own currency after becoming independent, having all used the U.S. dollar since 1944.
Two British dependencies also use the U.S. dollar: the British Virgin Islands and Turks and Caicos Islands. The islands Bonaire, Sint Eustatius and Saba, now collectively known as the Caribbean Netherlands, adopted the dollar on January 1, 2011, as a result of the dissolution of the Netherlands Antilles. The U.S. dollar is the official currency for governmental transactions in Zimbabwe.
Which countries fix their currency to the US Dollar?
Several countries peg their currency to the U.S. dollar, meaning that they maintain a fixed exchange rate with the dollar and intervene in their foreign exchange markets to ensure that their currency remains pegged at the predetermined rate. Some examples of countries that peg their currency to the U.S. dollar include:
Hong Kong
Kuwait
Bahrain
Oman
Saudi Arabia
United Arab Emirates
Belize
East Timor
Panama
El Salvador
It’s worth noting that while these countries maintain a fixed exchange rate with the U.S. dollar, they are not necessarily dependent on the U.S. economy. Rather, they may use the peg as a way to stabilize their own domestic economies or to make their exports more competitive.
What do US dollar banknotes look like?
The United States dollar is referred to as the dollar, U.S. dollar, or American dollar is also nicknamed the “green-back” as as you can see is predominantly green. So care should be taken when handing over money or checking your change in low-light situations. Post-2004 series banknotes have started to incorporate other colours to better distinguish different denominations.
Currently printed denominations are $1, $2, $5, $10, $20, $50, and $100. The following table shows the current design of the notes both front and reverse.
US dollar banknotes – front and reverse design (source Wikipedia)
BER Research 